We are now observing capacity levels similar to those seen at the top of the last soft market cycle in early 2019 in most regions in the construction insurance market and in most commercial lines of business. We expect this positive trend to continue during the second half of 2024 and into 2025
This is due to increased interest from insurers in maximizing deployment of local capacity along with an influx of new capacity as entrants establish themselves, including renewed interest from internationally based insurers and reinsurers and returning former market players.
This competitive environment, combined with the need for markets to grow their market share is expected to increase appetite and improve terms and conditions available to clients as we approach the end of 2024. This will also help alleviate the need for significant rate increases despite ongoing industry challenges such as high interest rates and persistent inflation, lack of specialized workforce and uncertainty on claims, rebuilding and litigations costs.
We remain confident that this positive market development will also increase interest in more aggressive lead insurers to see an opportunity to “step up” and fill in some of the gaps we are seeing particularly in large and complex CAR/ EAR risks, in heavy civils, and in Project Specific Professional Liability and Inherent Defect Insurance (IDI) coverages. This is especially relevant in Europe, Asia and Australia, as well as auto liability and lead umbrella casualty lines in the U.S.
However, the continued impact of natural catastrophe events remains a major concern and challenge in heavily exposed territories, particularly for windstorms in the Caribbean, and Gulf of Mexico, the U.S. East Coast and parts of Australia, Asia and Latam which also faces the "La Nina" effect this year. Insurers are still carefully managing their pricing and capacity aggregations in these areas, including secondary perils like wildfires, floods, cyclones, and hail, which affect many countries worldwide. There is a close emphasis on locations in Europe and in the Americas which has also led to a higher demand for detailed project information and a greater emphasis on risk mitigation strategies, risk profiling and modelling.
Overall, real construction growth will be driven by energy and utilities and infrastructure construction, which are expected to grow by 7.8% and 5.1% respectively in 2024. Globally, infrastructure and energy and utilities construction have experienced the largest growth compared to their pre-pandemic levels, with energy and utilities construction growing by 34% and infrastructure growing by 33% compared to 2019 levels, according to Global Data. Conversely, the residential sector will continue to struggle throughout the rest of 2024 and is expected to decline by 3.2% globally, according to Global Data.
There are some consistent and specific insights for all geographies that can be garnered by the commentary provided in this document.
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